Selling A House In Preforeclosure (Quick Guide)
Facing foreclosure can feel overwhelming, but there's still a chance to take control.
Did you know you can sell your house during pre-foreclosure?
Selling it at this stage will help you avoid the severe consequences of foreclosure.
In this guide, I’ll explain what a preforeclosure home is, how the process works, the pros and cons, and tips for selling a house in preforeclosure quickly.
What Is A Pre Foreclosure Home?
A preforeclosure home is one where the owner has defaulted on their mortgage payments and the lender has begun the legal process to repossess the home.
Usually, this means the lender has issued a notice of default.
A preforeclosure is the stage between the initial default and the actual foreclosure auction.
Also Read: Can I Sell My House While In Foreclosure
The owner is given a certain period of time to become current on the mortgage. If they cannot do so, the lender can then take steps to auction off the home.
As a homeowner, you still own and live in the property during pre foreclosure.
How Does The Pre Foreclosure Process Work?
The exact pre-foreclosure process depends on your location and the bank, but here's a general breakdown of the timeline:
- Missed Payments: You miss one or more mortgage payments.
- Notice of Default: After a certain number of missed payments (typically 3-6 months), the lender sends you a notice of default.
This official document outlines the missed payments and the potential consequences you face if you don't take action.
- Public Notice: The lender then files a public notice of default with the county recorder's office, making the pre-foreclosure status a matter of public record.
- Pre-Foreclosure Period: The pre-foreclosure period begins after the NOD is issued and usually lasts a few months.
You have the opportunity to catch up on missed payments, negotiate a loan modification, sell the house or explore options like a short sale or deed-in-lieu of foreclosure.
- Foreclosure Auction: If you can’t resolve the situation during the pre-foreclosure period, the lender will schedule a foreclosure auction, and the property will be sold.
If it doesn’t sell at auction, it will become REO property and be listed for sale by the lender.
Can I Sell A Home In Pre-Foreclosure?
Yes, you can sell a home during the pre foreclosure stage. The house still belongs to you until it is sold off at auction in a Sheriff’s Sale.
Selling it allows you to pay off your mortgage and avoid foreclosure.
However you only have a short timeline to sell it (30 - 90 days) before the auction.
And if the sale amount does not fully pay off the mortgage - which makes it a short sale, you need to get the lender's approval.
The lender will want to review purchase terms to ensure they will receive the expected payoff.
Pros And Cons Of Pre-Foreclosure Sales
Selling a pre foreclosure property has both advantages and disadvantages:
| Pros | Cons |
| Avoid foreclosure and save your credit | Short timeline adds pressure |
| Pay off mortgage and outstanding debts | Home may need repairs that are costly |
| Sell for more than an auction sale | May still owe lender if sale price is too low |
| More control over the selling process | Buyers hesitant due to foreclosure status |
IMO the pros significantly outweigh the cons, so if you can’t pay the mortgage payments.
I highly recommend selling your house rather than facing foreclosure.
How To Sell A Pre Foreclosure Home
If you do decide to sell your house in preforeclosure, there are two ways to do it:
List On The Open Market With An Agent
This is the traditional way we all know - repair the home, find a local agent, listing the house, marketing, negotiating offers and completing the sale.
You can get the highest possible price for your home if you do it this way.
However, the process can be lengthy, and time is a luxury you don't have in a preforeclosure.
There's no guarantee of a quick sale. Depending on market conditions, it could take weeks or even months to find a buyer.
And the repairs can take time too - and it can be expensive.
Also Read: Selling A Distressed Home
Plus, you'll have to pay real estate commissions and other selling costs if you go this route too.
Sell To A Cash Buying Company
The alternative is to sell your pre-foreclosure home directly to a cash buyer.
Cash buyers can close the sale quickly, often within a week or two, and you don't have to worry about repairs either. They purchase the property "as-is.
And since you're not using a real estate agent, you won't have to pay any commissions or closing costs.
Plus, cash buyers have the funds readily available, so there's no risk of the sale falling through due to financing issues.
The only downside is that you'll receive a slightly lower sale price compared to the open market.
Bottom Line
If you are facing a pre-foreclosure and you couldn’t get a loan modification - selling your home is probably your best option. You can avoid a foreclosure and a bad credit score.
FAQs
How Long Does A House Stay In Pre-Foreclosure?
The pre foreclosure period can last anywhere from 30 days up to 120+ days in some cases. The length depends on state laws and the mortgage lender.
How To Get Out Of Pre Foreclosure
Selling your house is one way to get out of pre foreclosure. You can request a loan modification or catch up on the missed payments.